January 20, 2017

PREFACE:

The British Prime Minister, the Right Honourable Theresa May, presented her government’s plan for Brexit negotiations in a speech to the nation on Tuesday, January 17, 2017.[1] Consisting of 12 distinct points,[2] the plan makes it quite clear that the U.K. does indeed want a clean break from the European Union and the freedoms and rights to control its own immigration and make its own laws,[3] but, at the same time, the U.K. wants to enjoy a good deal of continued access to the E.U. common market.[4] This is quite some progress since: (i) the High Court ruling of Thursday, November 3, 2016 that the prime minister could not unilaterally trigger the Brexit process[5] – which is still pending on appeal to the U.K. Supreme Court[6] that many knowledgeable Members of Parliament fear the government might ultimately lose;[7] and (ii) the overwhelming 448:75 vote in the U.K. House of Commons on Wednesday, December 7, 2016 to endorse and follow the prime minister’s plan to trigger the Brexit process by or before the end of March, 2017 – providing, of course, that both houses of the U.K. Parliament see and consider the final deal reached.[8] That parliamentary accord was effectuated and made public in point 1 of the Prime Minister’s Brexit plan.[9]

ANALYSIS:

In my original Brexit post,[10] made shortly after the June 23, 2016 vote, I had posited 7 actual, and 1 potential and as then undefined, model of what the UK’s future relationship with Europe might be.[11] Now, looking to the full transcript of prime minister May’s speech,[12] we can clearly see that several of these models – with all of them working well for their adherent nations, were rejected outright.

This model, the prior status quo, is rejected by the seeking of a full exit from the European Union and self-determination within the U.K. under both point 1 and point 2, as stated by the prime minister.[14]

This model, used by Norway, is rejected in the fact that the U.K. will no longer make significant and blanket contributions to the E.U. budget and programs, but retains the right to make limited contributions on select E.U. initiatives on which it has a vote and in which it acknowledges a continuing stake: “There may be some specific European programmes in which we might want to participate. If so, and this will be for us to decide, it is reasonable that we should make an appropriate contribution. But the principle is clear: the days of Britain making vast contributions to the European Union every year will end.”[16]

This model, used by Switzerland, involves free movement but it is rejected in point 5 and the U.K. prime minister’s stated desire to “[…] get control of the number of people coming to Britain from the EU.”[18]

This model, used by Turkey, also involves acceptance of cash contributions from the E.U. with mandatory enforcement of certain E.U. trade laws in Turkey, and the right of Turkish nationals to access E.U. welfare structures. As implied by the rejection of all the above models and as specified by the prime minister, this option is also off the table as it would not accomplish the full split from the E.U. that Britons want: ““European leaders have said many times that membership means accepting the “four freedoms” of goods, capital, services and people. And being out of the EU but a member of the Single Market would mean complying with the EU’s rules and regulations that implement those freedoms, without having a vote on what those rules and regulations are. It would mean accepting a role for the European Court of Justice that would see it still having direct legal authority in our country.””[20]

This model, used by Canada, eliminates duties on most exports for each counterparty and gives Canada access to the E.U. market at a time when access to the U.S. market to Canada’s immediate south, is under strong query by the incoming Trump administration.[22] Signed by Canada and the E.U. on October 30, 2016, it does still require approval by each and every one of the parliaments of the “current” E.U. member states, including the U.K.[23] That requirement could therefore still pose some problems regarding the deal’s entering into full force and effect. The prime minister also rejected this model in the preamble of her speech: “Not partial membership of the European Union, associate membership of the European Union, or anything that leaves us half-in, half-out. We do not seek to adopt a model already enjoyed by other countries. We do not seek to hold on to bits of membership as we leave.”[24]

The unilateral free trade policies adopted by Hong Kong and Singapore are not an option for the U.K., as the domestic economy would not be able to withstand the onslaught of cheap goods from all corners of the globe. On the contrary, the prime minister stressed the renewed U.K. desire to be and remain global and pursue as many free trade deals with as many free trading partner nations and groups of nations, as possible, in point 9: “We want to get out into the wider world, to trade and do business all around the globe. Countries including China, Brazil, and the Gulf States have already expressed their interest in striking trade deals with us. We have started discussions on future trade ties with countries like Australia, New Zealand and India. And President Elect Trump has said Britain is not “at the back of the queue” for a trade deal with the United States, the world’s biggest economy, but front of the line.”[26]

WTO default rules are generally used by trading nations where there is no existing trade agreement between them. Considering the prime minister’s intent in point 9 to set U.K. tariff lines at the WTO, and her call for a “phased approach” to implementation in point 12, it is quite likely that some form of WTO regime will be applied during the transition process: “But the purpose is clear: we will work to avoid a disruptive cliff-edge, and we will do everything we can to phase in the new arrangements we require as Britain and the EU move towards our new partnership.”[28] On the other hand, if the U.K. Parliament votes against the final deal as tabled, seeking amendments or issuing a total rejection of same, then advisable best practices of having WTO Rules ready to fill the void while that was all sorted out, and the stated and mutual intention for a phased implementation of the Brexit and its successor conventions would prevent one or a few hiccups from ending or permanently handicapping the process altogether.

As is now abundantly clear, the overall intention of Mrs. May’s government is to craft a relationship with the E.U. that does not fit squarely within the parameters of any of the foregoing options, but includes: significant customs and regulatory cooperation (but not full integration) with the E.U. through a broad free trade agreement; strong cooperation and integration with the E.U. in matters of science and technology; deep security cooperation with the E.U.; a plethora of free trade agreements with other nations; maintaining the free movement of Britons within the U.K. as well as a somewhat semi-porous E.U. border through the Irish Republic; greater worker rights and protections within the U.K.; and solidification of the ties binding the UK’s constituent parts together by means of greater power devolution of powers from England to local lawmakers in Wales, Scotland, and Northern Ireland.[30]

In any case, the eventual model must achieve Mrs. May’s overarching vision for the future Britain:

“I want this United Kingdom to emerge from this period of change stronger, fairer, more united and more outward-looking than ever before. I want us to be a secure, prosperous, tolerant country – a magnet for international talent and a home to the pioneers and innovators who will shape the world ahead. I want us to be a truly Global Britain – the best friend and neighbour to our European partners, but a country that reaches beyond the borders of Europe too. A country that gets out into the world to build relationships with old friends and new allies alike.”[31]

To underline that fact and to let both the European nations and the British voters at home know that she and her staffers would be very serious, deliberate, and focused in their approach to and conduct of those Brexit negotiations, the prime minister also made it abundantly clear that she would walk away from a bad deal for Britain if that were the last or sole option that the Europeans put on the table: “I am equally clear that no deal for Britain is better than a bad deal for Britain.”[32]

PROGNOSIS:

While the path ahead for prime minister May and her party is fraught with dangers, today’s inauguration of Donald J. Trump as the 45th president of the United States of America,[33] has left many nations queasy, uneasy, and seeking free trade deals of their own – Canada with 70% of pre-Trump exports going to the United States,[34] will now likely consider deeper ties with China, Japan and India,[35] and China is already considering and sealing deals with everyone.[36] As a result of this deal frenzy, the Britons will therefore find very many parties willing to talk trade with them. Indeed, China’s President, Xi Jinping, best summed-up the current global thinking on trade[37] amidst the tweet-fuelled apprehension caused by Mr. Trump and his protectionist leanings,[38] when the former said:

““Pursuing protectionism is like locking oneself in a dark room, [w]ind and rain may be kept outside, but so is light and air.””[39]

Once again, then, the “great game”[40] for geopolitical and economic leverage is on. This time, however, the landscape is global, and Britain and Russia – the protagonists of yore trying to shoulder their way back-in, have given significant ground to the new prime movers of China, the E.U., and at least until now, the United States of America.

Let us therefore wait and see what the British Supreme Court has to say on Brexit, which nations end-up locking themselves into those dark, and which nations throw open their doors and windows to get the best access to the shared light and air of trade that gives jobs, mutually assured security, and life itself.[41]

Ekundayo George is a lawyer and sociologist. He has also taken courses in organizational and micro-organizational behavior, and gained significant experience in regulatory compliance, litigation, and business law and counseling. He is licensed to practise law in Ontario and Alberta, Canada, as well as in New York, New Jersey, and Washington, D.C., in the United States of America. See, for example: http://www.ogalaws.com. A writer, blogger, and avid reader, Mr. George has sector experience in Technology (Telecommunications, eCommerce, Outsourcing, Cloud), Financial Services, Healthcare, Entertainment, Real Estate and Zoning, International/cross-border trade, other services, and Environmental Law and Policy; working with equal ease and effectiveness in his transitions to and from the public and private sectors. He is a published author on the National Security aspects of Environmental Law, has represented clients in courts and before regulatory bodies in both Canada and the United States, and he enjoys complex systems analysis in legal, technological, and societal milieux. Trained in Legal Project Management (and having organized and managed several complex projects before practising law), Mr. George is also an experienced negotiator, facilitator, team leader, and strategic consultant – sourcing, managing, and delivering on complex engagements with multiple stakeholders and multidisciplinary teams. Team consulting competencies include program investigation, sub-contracted procurement of personnel and materials, and such diverse project deliverables as business process re-engineering, devising and delivering tailored training, and other targeted engagements through tapping a highly-credentialed resource pool of contract professionals with several hundred years of combined expertise, in: healthcare; education and training; law and regulation; policy and plans; statistics, economics, and evaluations including feasibility studies; infrastructure; and information technology/information systems (IT/IS) – also sometimes termed information communications technologies (ICT). See, for example: http://www.simprime-ca.com.

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[3]Id at point 2: “Leaving the European Union will mean that our laws will be made in Westminster, Edinburgh, Cardiff and Belfast. And those laws will be interpreted by judges not in Luxembourg but in courts across this country”.

[4]Id at points 8 and 9: “Instead we seek the greatest possible access to it through a new, comprehensive, bold and ambitious Free Trade Agreement“. “Whether that means we must reach a completely new customs agreement, become an associate member of the Customs Union in some way, or remain a signatory to some elements of it, I hold no preconceived position”. “I have an open mind on how we do it. It is not the means that matter, but the ends“.

[7]Id. “Losing”, in this context, means that a majority of the 11 Supreme Court judges will rule that the government “must” seek parliamentary approval to trigger a Brexit. “Losing badly” means said majority of judges will either (a) specify what the government must seek or achieve from Brexit negotiations; or (b) that the government must secure “specific” approvals from Scotland and Ireland (which voted to remain) – and which would require advance concessions to secure that approval; or (c) that a patchwork of other conditions or preconditions must be met, and which would both severely constrain the government in its negotiations, and publicize its strategy to its detriment.

[9] Time Staff. Posted January 17, 2017 on time.com. Read Theresa May’s Speech Laying Out the U.K’s Plan for Brexit. Web: <http://time.com/4636141/theresa-may-brexit-speech-transcript/> at Point 1: “I can confirm today that the government will put the final deal that is agreed between the UK and the E.U. to a vote in both Houses of Parliament, before it comes into force.”

June 30, 2016

WHAT JUST HAPPENED? (a quick summary):

Comprising England, Wales, Scotland and Northern Ireland, the United Kingdom of Great Britain and Northern Ireland (being much more commonly known as “the U.K.” or “Britain”),[1] voted in a national referendum on Thursday, June 23, 2016 to leave the European Union,[2] despite prior predictions of some rather dire consequences if the outcome was a “leave” vote.[3] The voter turnout was 72.2%, and the final result was 51.9% in favour of leaving and 48.1% in favour of staying.[4] In accordance with the E.U. founding principles, the U.K. has up to 2 (“two”) years to negotiate and complete its exit, once it has officially notified the E.U of its intention to so do.[5]

However, this very close result has already had significant repercussions: the British Prime Minister, the Honourable David Cameron, has announced his pending resignation – to be done by October, 2016 at the latest,[6] ahead of the October 2-5, 2016 Conservative Party conference where a new party leader will be chosen;[7] the Honourable Jeremy Corbyn who leads the U.K. Labour Party, may yet be forced out of office after he fired one of his shadow cabinet ministers and more than ten others promptly resigned shortly thereafter, with the result that a confidence vote on his leadership of the party loomed large;[8] the British Pound (never abolished during decades of E.U. membership) has been driven to a 30-year low in global foreign currency markets[9] and the UK credit outlook and rating have also been adversely hit;[10] the European Union which does not want a lingering (and possibly contagious) exit crisis[11] has already and swiftly appointed a high-level negotiator to lead the U.K. withdrawal;[12] dissenting voices to the “yes”/ “exit”/ “leave” vote have called for a re-run of the Referendum with a petition for same adding signatures now into the millions,[13] a further referendum in Scotland, which voted to remain in the E.U., is likely – with additional rumblings of a possible re-unification call for Northern Ireland (which also voted to remain) and the Republic of Ireland (which is already an E.U. member);[14] and finally, even one of those voices most strongly in favour of Brexit, has now called for a slow and measured exit process.[15] The question remains, thought, whether that is due to his desire to avoid turmoil and undue haste in the nation at large, or to his playing for time until he can make a credible push for the Conservative Party leadership?

Of note, nevertheless, business leaders in the U.K. also and generally caution against too hasty an exit from the E.U.[16] However, global banks with significant footprints in London may soon need to make some very tough decisions in light of a potential isolation of London from the lucrative E.U. financial markets amidst what may or may not be posturing threats to that effect from one very credible voice at the European Central Bank (ECB), who happens to be both the governor of the Central Bank of France (which nation may stand to gain banks and bankers fleeing a Brexit),[17] and a member of the ECB governing council.[18]

WHY DID IT HAPPEN? (the big picture):

By way of some initial disclosure, I lived and studied in the U.K. for several years, and so I do have some insights (albeit dated) into the local politics, the highly-varied economic landscape, and local moods across different regions – vibrant financial hubs v. depressed coal producing and manufacturing regions; struggling farmers; jobless, student loan debt-laden graduates[19] and inner city youths competing for scarce jobs, and even scarcer public financial support against both senior citizens who feel that they have paid their dues and can now get help from the state, and new immigrants without the credit histories that would enable bank and building society loans, but who nevertheless seek state assistance for settlement, integration and retraining, and setup costs to establish themselves in their new U.K. home. Nevertheless, although this is more of an independent analytical exercise than a legal commentary, I might still catch some flak for this article from “old friends”, as the feelings for and against Brexit are and remain, “quite” heated, with one senseless death to date.[20]

SOVEREIGNTY: The stated reason for a majority “leave” over “remain” vote is a desire for sovereignty over E.U. domination. But what does that very old concept mean in and for the U.K.? Chanelling the 900+ year-old Yoda,[21] from Star Wars, one might sum it all up to make a sovereignty definitional statement of: “FIRST, AM I !”[22] So, with that starting point, let us then examine each of the 8 (“eight”) letters of that definitional statement as an independent element that further represents, and as listed in that same sequence: Farms, Immigration, Resources, Security, Trade, Appearance, Monetary, and Incidents.

(a) FARMS – There is a farm crisis in the U.K. This ranges from a base history of intensive over-farming leading to warnings of declining yields and declining biodiversity;[23] through a canopy of over-leveraged dairy farmers with up to 20% of their number projected to be forced out of the farming business just in 2016 – on top of a 50% drop in the head count of dairy farmers in England and Wales over the last decade, alone;[24] to the four sides of a box comprising rising input costs, falling “farm gate” prices for produce including beef, pork, chicken, mutton and dairy products alike, delayed E.U. subsidies, and a lingering and very costly agricultural spat with Russia over its actions in Ukraine.[25] Freedom from the E.U. would allow the U.K. to set its own agricultural policies, help farmers, and make its own trade deals.

(b) IMMIGRATION – Stricter limits on access to the U.K. by Commonwealth Citizens[26] have been more than compensated-for by easier access for E.U. Citizens, especially Bulgarians and Romanians.[27] Currently powerless to: (i) exercise more than its limited Schengen opt-outs from European asylum laws, or go beyond imposing immigration access controls over non-E.U., third-country nationals;[28] (ii) put the immigration issue before its citizens[29] and make and enforce its own immigration policy at odds with those of the European common market; or (iii) do much more than grumble at a perceived “benefit tourism”[30] that attracts too many foreigners to the U.K. in efforts to milk what many perceive as a generous welfare state, the U.K. would be free after leaving the E.U. to set its own rules, make its own way, and free up jobs for its own indigenes as foreigners were either required to first leave and then re-apply for visas from their home countries, saddled with quotas or other preclusive conditions, or simply expelled. That last policy choice, however, can cut both ways, and so most governments with workable alternative options would likely choose against facing a sudden retaliatory influx from far and wide of large numbers of similarly deported and “quite” irate Britons.

(c) RESOURCES – The U.K. has been developing significant wind power projects with a Q1 2014 installed capacity of 10.5 gigawatts that was the third highest in Europe behind Germany (34 gigawatts), and Spain (23 gigawatts).[31] In addition, and at least until the recent commodity price decline, it had long-relied on abundant North Sea oil for both steady jobs and government revenues,[32] and the U.K. has long been both a producer and consumer of its own coal – whether for power generation or steel production.[33] Today, the coal industry is declining as the trade in carbon offsets grows,[34] and the U.K. steel industry remains stymied by high energy costs and loses ever more jobs to lower cost producers in China and subsidized producers in mainland Europe that the U.K. was slow to emulate.[35] This, and tariff inequities between the U.S., China, and E.U. continue to confuse hapless U.K. steelworkers who expected more support from their government for what they consider to be a strategic industrial sector.[36] Unfortunately, steel is not one of the U.K. top industrial sectors, as it ranks 11th in revenue (by rounded £billions) after: Motor vehicles (£45b), Air and spacecraft (£20.6b), Meat (£12b), Pharmaceuticals (£10.1b), Dairies & cheese making (£7.5b), Printing (£6.3b), Bread, pastries and cakes (£6b), Metal structures (£5.9b), Measuring instruments (£5.5b), Machining (£5.5b), and finally Steel (£1.6b).[37] Given this discrepancy in what the steelworkers and the government respectively felt that their jobs and livelihoods were worth, it should be little wonder that high steelworker job loss areas corresponded closely (if not matched perfectly), with those areas voting to leave the E.U. for a more “sovereign” future.[38]

(d) SECURITY – Unlike U.S. citizens who, for the most part, remain strongly opposed to unbridled government surveillance of the populace, as ironically echoed in a recent congressional action on enhancing the privacy of emails and other stored communications,[39] the majority of U.K. citizens (60%) were found in a recent Comparitech poll to support government surveillance of private communications for reasons of national security.[40] While 65% of respondents agreed with intercepting communications to tackle criminal activity, this rate jumped to 77% when queried in relation to combating acts of terrorism and thwarting terrorist actors.[41] With regard to participation in E.U. security structures, policy-making, and security postures around the world, a February, 2016 U.K. Commons Briefing Paper discussing likely pros and cons of a Brexit,[42] summarizes that the E.U. would lose more than the U.K. on a Brexit, as: (i) the U.K. and France were the only two major military powers within the E.U. and so the U.K. would lose no supporting security structures, given its remaining within NATO; (ii) the U.K. could easily step back from a role in helping to formulate E.U. security policies and do the same, perhaps even more credibly so, within NATO and on the United Nations Security Council (UNSC); and (iii) the U.K. had long played a role in key areas such as the Middle East, Asia, and Africa, gaining valuable foreign policy experience and foreign influence that the E.U. – except France with its similarly long colonial history, was still working to match. In those areas where the U.K. was lacking, its “special relationship” with the United States would fill the gap as the two nations often acted in concert. Essentially, the U.K. would lose nothing security-wise in a Brexit and could set its own security agenda outside the E.U., but still act as a third-party state helping to ensure the success of the E.U. Common Security and Defence Policy (CSDP).[43]

(e) TRADE – The E.U. Common Commercial Policy (CCP) precludes its members from entering into their own bilateral trade negotiations and relationships.[44] Let us therefore look at actual trade figures. In 2014, services accounted for 38% of U.K. exports to the E.U. and 48% of imports from the E.U., and in 2015, goods accounted for 47% of exports to the E.U. and 54% of imports from the E.U.[45] Yes, it is true that the U.K. might free itself from the CCP restraints after Brexit, and move to rekindle relationships amongst its Commonwealth members as a resurgent leader of same. However, the world has not stood still in the interim and many of these former staunch trading partners have already secured trading deals with the three central BRICs members (Russia, India, and China), the United States, and the E.U. as a whole. The E.U. has already negotiated a trade deal with Canada, a strong U.K. trading partner, and is working on finalizing a far-reaching one – the Transatlantic Trade and Investment Partnership (TTIP), with the United States of America.[46] Of the U.K.’s top 7 export markets for both goods and services in 2014, Germany was first (12.8%), the U.S.A. was second (9.4%), China was third (7.0%), France was fourth (6.7%), the Netherlands was fifth (6.6%), Spain was sixth (4.7%), and Belgium was seventh (4.4%).[47] This 51.6% total of all 2014 U.K. exports had only 16.4% of its footprint (1/3) outside the E.U. and fully 35.2% (2/3) in. Considering the foregoing, and lacking any guarantee that the E.U. markets can be easily replaced, if at all, the U.K. would do well to negotiate continued trading access to the E.U.[48]

(f) APPEARANCE – Whether we like it or not, there has been a backlash in the U.K. over the changing appearance of a society that includes more and more “foreigners” – those who do not look like so-called classic Britons (despite centuries of colonialism, in-migration, and mixed marriages), and those who do not dress like so called classic Britons. Unlike the United States and Canada where many have – and may still even be able to trace through written records and DNA, an ultimate ancestry that started far away from where they are now, there are, one concedes, millions of Britons in the British Isles who can trace their roots to “indigenous” Angles and Saxons, Scots and Norsemen, Welshmen, and the Irish. Student ranks in U.K. educational institutions continue to comprise increasing numbers of Chinese, Brazilian, and Malaysian nationals,[49] and the “student route” remains the prime suspect in a leaky immigration system of visa overstays and welfare cheats, despite the fact that many non-E.U. national students still return home after completing their studies, or stay and start families and legitimate jobs in the U.K. in full compliance with all of the applicable rules.[50] “This” appearance issue, however, centers on E.U. citizens, as opposed to refugees in mainland Europe and peoples of African and Caribbean descent.

Last year, net migration to Britain — the difference between inflows and outflows — hit a record high at 336,000. Of those, 180,000 were E.U. citizens, who can move to Britain simply by hopping aboard a plane or a train. Unlike in countries across continental Europe, refugees made up only a relatively small portion of the inflow in Britain.[51]

(…) Jackson, the member of Parliament, said his constituents aren’t naturally prejudiced toward foreigners. But he said they have been poorly served by governments that cheer the overall economic benefits of immigration without accounting for the downside: Hospitals and schools are strained, waiting lists for public housing grow longer, and workers — particularly those with low skills — are squeezed out of the labor market.[52]

Where people feel, rightly or wrongly, that foreigners are willing to take their jobs for less pay, including those jobs that the locals might not even want, then the impetus to change appearances and the lingua franca back to something more immediately local, becomes that much harder to overcome or reverse.

(g) MONETARY – The U.K. contributed a net amount (in £billions) of £10.5b (2013), £9.8b (2014), and £8.5b (2015) to the E.U. budget in each of those years, respectively.[53] The U.K. net contribution has clearly been decreasing, but the overall E.U. budget growth (in €billions) has remained quite stable at €144b (2013), €143b (2014), €145b (2015), and €155b (2016).[54] While understanding the details of inner E.U. money mechanics requires a more detailed understanding of fiscal matters, the average Briton who watches, listens to, or browses the news can likely point to one of three apparent conundrums or clear contradictions in the E.U. machinery of governance, that may well have been highlighted by a “leave” campaigner, or been enough to move the individual himself or herself, to consider a clearer and less convoluted sovereign path. The first contradiction, is how to reconcile an unceasing promotion of individual rights with the use of a bail-in that taxed innocent holders of deposits in Cyprus’ banks, when the fault lay with bankers and bureaucrats?[55] The second contradiction, is how to reconcile the promotion of fiscal responsibility and austerity for member states on the one hand, with conditioning the infusion by bailout (good money chasing bad) of more public funds from E.U. members, on ending price controls, deregulating markets, and forced privatizations of public assets and services, on the other,[56] when the “known, known” result is market domination by deep-pocketed foreigners,[57] and public benefits that get delayed or cancelled as part of a bailout or for simple lack of funds, which ends up causing even greater suffering?[58] The third contradiction, is how to reconcile a push for growth and the individual savings that will enable the lending that spurs business investments and growth, with negative interest rates that penalize commercial banks for depositing their excess funds with a central bank,[59] discourage bond buying (corporate, municipal and treasury) and equities trading in financials as banks find it harder to make money,[60] and as one major asset manager concludes, defeat the purpose?[61] Endangering the core profitability of the world’s most systemically important financial institutions by eliminating the spreads between “lending and borrowing rates” or “investment returns and funding rates”, may simply create another banking crisis.[62] The U.K., being a global banking centre with several options other than negative rates,[63] may now break free of the ECB and start making its own monetary policy.

(h) INCIDENTS – A number of incidents have now come to characterize membership in the E.U. and its way of life. Immigration and appearance have been central, with incessant migrant flows that leave thousands dead at sea,[64] crises at E.U. borders,[65] and rampant lawlessness by non-Europeans – including swarming sexual assaults, in the staunchest E.U. “law and order” member and migration champion, which seemed powerless to stop them.[66] These are things that Britons just do not want at home. Further seeing the monetary inequity in grossly imbalanced healthcare funds transfers between the U.K. and E.U for citizen healthcare abroad,[67] a trade hindering mid-summer blockade of the port of Calais by disgruntled French ferry workers,[68] and the security failings of multiple incidents of terror in France[69] and then Belgium,[70] many in the U.K. would doubtless be happier with a sovereign and independent collection of “home-made” health, immigration, and security policies for the U.K. that include such sometimes contentious measures as (robust) border controls, (stricter) asylum restrictions, (greater) controls on the acquisition and removal of citizenship, and (more frequent) use of deportation orders.[71]

WHO HAS THE LEVERAGE?:

Now that we are a lot clearer on what just happened, and now that we have considered some of the most likely reasons that many of those who chose U.K. independence, voted to leave, let us undertake a truncated SWOT analysis (strengths, weaknesses, opportunities and threats) of the major parties, their anticipated and dynamic agendas, and their respective degrees of leverage in this very fast-moving situation.

“S-W-O-T” ANALYSIS:

(I) STRENGTHS – England and Wales have a long history of togetherness, and they both voted as a whole to leave, which further cements them together. Scotland, with a population of 5.2 million that wants to remain, retains the North Sea oil, but depended (in 2013 figures) on the E.U. for 46% of its export market, with top destinations therein being the Netherlands, Germany, and France.[72] Additionally, the bulk of exports (49.3%) were concentrated in only 5 (“five”) sectors (food and beverage manufacture at 18%, coke, refined petroleum, and refined chemicals manufacture at 12.6%, legal and accounting at 6.7%, machinery at 6.3%, and electronic products at 5.7%),[73] and fully 49% of all Scottish exports were destined for the United States.[74] Similarly, Northern Ireland, which also wants to remain, has significant strengths in several key areas. With a population of 1.8 million, Northern Ireland hosts 12,000 construction companies and over 60 companies in aerospace and defence – with the latter including Bombardier, Thales, and ThyssenKrupp Aerospace; there are 32,000 people employed in financial services – including with Citigroup, Allstate, Lloyds and Santander, 20,000 people employed in food and drink, and 13,000 employed in business services – including at contact centres for Concentrix and Convergys; and it has additional and solid clusters in ICT and electronics, life and health sciences, renewable energy, and cybersecurity.[75] On the other hand, however, the E.U. which has the carrot of a large local market of 508 million consumers[76] that the U.K. and its constituent parts have become accustomed to accessing and servicing, also has the strength of making and imposing the rules of access, and the stick of sanctions or suspensions against rule-breakers.

(II) WEAKNESSES – Scotland and Northern Ireland want continued access to the E.U. and are likely prepared to make deep concessions to get it. The U.K. as a whole is weakened, and England and Wales will be trying to negotiate continued market access but without accepting all of the rules that they have voted to avoid. With slightly fewer Citizens in England and Wales alone, they also apparently have less of a carrot to offer as enticement for negotiating a continued market access deal that favours them, overall. The E.U. currently has the upper hand and can push a hard bargain. However, as time goes on and England and Wales either appear to strengthen or just play for time, the E.U.’s hand will weaken as others among its 27 remaining members[77] the citizens of which, now well aware of the reasons behind the successful U.K. referendum on leaving, also start to agitate for their own referendum options.[78] If too many choose that path or push back against the E.U. for real changes to placate their populations, then the E.U. will be forced to change, or may itself break apart into smaller blocks, or a far looser, less powerful, and less enticing confederation. Unless it can show some positive headway in a very short time, England and Wales may also come to find that its currency – long seen as a stalwart and global reserve, becomes far less valuable, which will further erode its GDP, and business and bargaining status.

(III) OPPORTUNITIES – England and Wales, at least before the rhetoric and rancor between their leaders grows too harsh, can make concessions to Scotland and Northern Ireland to retain continued access to their markets for U.K.-based businesses, permit U.K. citizens to travel to and from these jurisdictions for work on very liberal terms, and in the case of Scotland, come to some lease arrangement for their Scottish submarine bases as well as some shared cost, revenue, and technical and staffing agreement for the North Sea oilfields. Northern Ireland, for its part, can further exploit its existing competitive advantages and highly-educated workforce to attract those global and even local businesses based in England and Wales, perhaps even with free trade zones – with specific targeting of footloose financial institutions, manufacturers and automobile manufacturers who do not want to relocate too far, head offices with line and staff operations that might be anywhere, and well-heeled European and other expatriates who had thought to settle and plant their funds, in and around the capital of a U.K. firmly within the E.U. The many castles, country estates, abbeys and priories of Northern Ireland may even be presented as opportunities to immigrate and invest some pre-agreed assessment with periodic upkeep, into the historic life and lore of the land, and live (and run and/or renovate) like Kings and Queens and Lords of the Land, because absentee landlords can still reap profits from tourist traffic in their absence.[79] Conversely and by no means standing still, the U.K. can also offer tax, subsidy, and other concessions for branch plants and head offices to stay. It remains to be seen whether one or more of these parties will be able to reach an agreement with the E.U. such that head offices based within their own territories, will have their goods and services more favourably treated (despite origin or situs) regarding E.U. market access, than those based in the odd-man or odd-men out amongst these three of England and Wales, Scotland, and Northern Ireland. Success on this specific point for England and Wales would be a boon that allows global bank headquarters to stay in London. Loss of E.U. membership would mean loss of “Passporting” rights within the EEA, which give financial institutions that are currently based in the U.K. (and therefore the EEA),[80] the right to access and serve the EEA market without having to first establish local branches in each of those 30 other EEA jurisdictions.[81]

(IV) THREATS – England and Wales may feel that moving slowly in terms of triggering the two-year timeline to conclude exit negotiations, is best for them and will gain them leverage against the E.U., and those parts of the U.K. that did not vote to leave. However, with the rising disarray of the Labour Party and the lack of a solid leadership in the governing Conservative Party, there is a growing power vacuum. Prime Minister Cameron is gravely wounded in prestige and credibility and has said, quite prematurely, in my own opinion, that he will resign. This makes him a lame duck, so to speak, with low perceived authority. Indeed, if he tries to take charge and move the country in a specific direction, he may become a lightning rod for the disgruntled – whether on one or both sides of the referendum, as emotions continue to run high. The Conservative Party would be best served to call an election as soon as possible, as a new leader chosen from within the now-discredited party that both sides distrust, might otherwise not enjoy public support, or even legitimacy. With continuing turmoil in the global markets, downgraded U.K. credit ratings,[82] and slowing investments due to this uncertainty, the residents of entire regions of the U.K. (stay and leave alike), that are put into further distress, may take matters into their own hands which would herald the start of scuffles, then riots, and ultimately local “nationalizations” of assets and properties with the expulsion of perceived outsiders – including those who voted on the wrong side, and other lawlessness. If the U.K. military, which is based on locally formed and maintained Regiments, is called upon to restore order, then they may even mutiny in their own home areas and support the breakaway locals, with discipline rapidly breaking down across the land and the U.K. dissolving into armed and mutually hostile ethnic, economic, or interests-based enclaves. Any subsequent move by the E.U., the North Atlantic Treaty Organization (NATO) as a whole, or others (including the United States), to morally or physically intervene would be seen by the locals as an attempt to support or force one side or another, and thus only serve to make matters much worse.

WHERE MIGHT THIS ALL GO?:

What then is the likely result of all of this, when will it all end, and where will the parties all be when the dust settles? The answer, is “I don’t know” times three; but there are three possible scenarios that might still play-out, as listed and briefly described below from the worst case, to the best case.

OPTION CC – COARSE & CACOPHANOUS: The fact that the U.K. will break apart is, I think, inevitable. There is no way to redo or cancel the results of the referendum without wide-scale revolt and a total loss of global credibility, and one nation cannot go in two directions – “remain” and “leave”, at the same time. Even a national election with party platforms specifically for and against invoking Article 50, could lead to disaster, as it would be seen by “leave” voters as an under-handed attempt to disenfranchise them and void their referendum votes. On the other hand, sliding chaos due to sustained indecision and a lack of leadership may ultimately lead to a result similar to that of the Balkans and the former Yugoslavia, with heavy loss of life as those who want to split must overcome the forceful efforts of those who clearly do not want them to leave. In this scenario, there will be little to no immediate opportunity for sustained good economic relations between the (likely three, to start) main constituent parts of a former U.K.

OPTION BB – BALANCED & BILATERAL: A brief period of posturing and some violence may eventually settle into a more sedate split, akin to that of the former Soviet Union – albeit reached after a period of tensions and limited open conflict. The responsible division of assets and liabilities will be negotiated, and each and all of the former constituent entities of the U.K. will steel themselves for rough times ahead as they try to make their way on their own terms, and with their own wits and resources. This, of course, would require good faith on all sides, including: (i) the timely giving of consent by England and Wales for referenda in Scotland and Northern Ireland, or fuller and even complete devolution of legislative powers;[83] (ii) the removal from U.K. devolution statutes (if retained, and the U.K did not split-up) of references to E.U. laws – without which removals, both of these “remain” regions would still be bound by E.U. laws, regardless of whether or not they remained within the E.U.;[84] and (iii) the granting by Scotland and Northern Ireland, of their consent to England and Wales to amend devolution legislation in the first instance, when such amending legislation was tabled in London’s Houses of Parliament.[85] Providing that the E.U. reciprocates[86] and itself remains as a cohesive entity, some or all of these parties may also enjoy continued and expansive access to that market, such as with Norway.[87]

However, the specific status and look of these new arrangements would depend on the level and degree of concessions that the E.U. was willing to give, and they were willing to make, and there are several models, including the Norwegian model, from which to choose.[88] I will now present these, very briefly, as comparable and assessable on the 8 (“eight”) g-r-a-t-s-i-a-s factors of: General nomenclature; Rules and regulations; Agriculture; Treaties and trade; Surcharge; Immigration; Adherents; and Services.

Services – General Agreement on Trade in Services (GATS), with limited access.

Model IIX: Some, or None of the Above (*unknown unknown*).

General nomenclature – to be determined.

Rules and regulations – to be determined.

Agriculture – to be determined.

Treaties and trade – to be determined.

Surcharge – to be determined.

Immigration – to be determined.

Adherents – to be determined.

Services – to be determined.

OPTION AA – ALTERNATE AMALGAMATIONS: With no major incidents of violence, the three U.K. constituents may be able to both negotiate continued cordial political and business arrangements between themselves and with the E.U., and enter into a number of other alternate amalgamations. For example, the Republic of Ireland and Northern Ireland may re-unify (with the latter already sending 37% of its exports to the former, and 60% to the E.U. as a whole),[96] finally match and merge their corporation tax rates,[97] and likely remain within the Eurozone[98] with full adoption of the Euro, as the currency to be used island-wide due to the gains E.U. membership has brought to them both;[99] Northern Ireland and Scotland may join to co-exploit their comparative advantages as earlier mentioned,[100] possibly with a new common “petro-currency”, and either in or out of the E.U.; or, one or both of Scotland and Northern Ireland may each remain solo but enter into a loose form of confederative relationship with England and Wales – using the Pound Sterling, the Euro, and likely also a third “national” currency.

WHAT IS MY OWN TOP CALL?:

And so? Many are busy trying to predict the long-term consequences of the Brexit vote for other nations and regions of the world before these above initial waves are settled. To me, this is like inviting 8 (“eight”) ballroom-trained octopuses[101] to give an impromptu underwater demonstration of the Brazilian Samba, Foxtrot, Jive, Mambo, Paso Doble, and Tango, and then trying to determine: (i) which ones will pair-up; (ii) which dance(s) each pair will choose; (iii) which is male and which is female with any certainty, and consequently which will lead and which will follow for each dance; and (iv) which tentacles each participant will use in their respective dance routines. A lucky guess or two may well accrue, but seriously?! There are too many moving parts and not enough grounding, settled precedent ……. the data is just too big!

Some people are now even hinting that the U.K. government will so delay the invocation of Article 50 and leaving the E.U. that it won’t even happen. I think this view is ludicrous, at best, and I both favour and predict an ultimate result for the U.K. of one of the 3 options (of AA, BB, or CC) immediately above.

Of course, I could be totally wrong in one, or some, or all of my own many assumptions and predictions.

But then again, the analysis that leads to these conclusions is very clearly laid-out and set on some pretty sound ground; and so, I might not ……[102]

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Author:

Ekundayo George is a lawyer and sociologist. He has also taken courses in organizational and micro-organizational behavior, and gained significant experience in regulatory compliance, litigation, and business law and counseling. He is licensed to practise law in Ontario and Alberta, Canada, as well as in New York, New Jersey, and Washington, D.C., in the United States of America. See, for example: http://www.ogalaws.com. A writer, blogger, and avid reader, Mr. George has sector experience in Technology (Telecommunications, eCommerce, Outsourcing, Cloud), Financial Services, Healthcare, Entertainment, Real Estate and Zoning, International/cross-border trade, other services, and Environmental Law and Policy; working with equal ease and effectiveness in his transitions to and from the public and private sectors. He is a published author on the National Security aspects of Environmental Law, has represented clients in courts and before regulatory bodies in both Canada and the United States, and he enjoys complex systems analysis in legal, technological, and societal milieux. Trained in Legal Project Management (and having organized and managed several complex projects before practising law), Mr. George is also an experienced negotiator, facilitator, team leader, and strategic consultant – sourcing, managing, and delivering on complex engagements with multiple stakeholders and multidisciplinary teams. Team consulting competencies include program investigation, sub-contracted procurement of personnel and materials, and such diverse project deliverables as business process re-engineering, devising and delivering tailored training, and other targeted engagements through tapping a highly-credentialed resource pool of contract professionals with several hundred years of combined expertise, in: healthcare; education and training; law and regulation; policy and plans; statistics, economics, and evaluations including feasibility studies; infrastructure; and information technology/information systems (IT/IS) – also sometimes termed information communications technologies (ICT). See, for example: http://www.simprime-ca.com.

Hyperlinks to external sites are provided to readers of this blog as a courtesy and convenience, only, and no warranty is made or responsibility assumed by either or both of George Law Offices and Strategic IMPRIME Consulting & Advisory, Inc. (“S’imprime-ça”) including employees, agents, directors, officers, successors & assigns, in whole or in part for their content, accuracy, or availability.

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[5] This can be accomplished through an amendment that was first titled as new Article 49 A through the 2007 Treaty of Lisbon, which amendment became Article 50 of the 1993 Maastricht Treaty, or “Treaty of the European Union” (TEU). See TREATY OF LISBON. AMENDING THE TREATY ON EUROPEAN UNION AND THE TREATY ESTABLISHING THE EUROPEAN COMMUNITY (2007/C 306/01). Posted in the Official Journal of the European Union and visited June 24, 2016. Web: <http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:C:2007:306:FULL&from=EN>

The following new Article 49 A shall be inserted:

“Article 49 A

Any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements.

A Member State which decides to withdraw shall notify the European Council of its intention. In the light of the guidelines provided by the European Council, the Union shall negotiate and conclude an agreement with that State, setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union. That agreement shall be negotiated in accordance with Article 188 N(3) of the Treaty on the Functioning of the European Union. It shall be concluded on behalf of the Union by the Council, acting by a qualified majority, after obtaining the consent of the European Parliament.

The Treaties shall cease to apply to the State in question from the date of entry into force of the withdrawal agreement or, failing that, two years after the notification referred to in paragraph 2, unless the European Council, in agreement with the Member State concerned, unanimously decides to extend this period.

For the purposes of paragraphs 2 and 3, the member of the European Council or of the Council representing the withdrawing Member State shall not participate in the discussions of the European Council or Council or in decisions concerning it. A qualified majority shall be defined in accordance with Article 205(3)(b) of the Treaty on the Functioning of the European Union.

If a State which has withdrawn from the Union asks to rejoin, its request shall be subject to the procedure referred to in Article 49.”

“”People here don’t understand,” Farage said on Friday morning in Westminster, central London’s political district. “They’re too wealthy, they don’t get what open-door, mass immigration as a result of EU membership has done to people’s wages, to people’s availability of getting doctors’ appointments, or their kids into local schools. This was the issue ultimately that won this election.””

[22] I strongly and unequivocally condemn all violence related to this referendum, and make no suggestion that I do or anyone else does, support or condone the actions of the individual arrested for the shooting of MP Jo Cox.

[55] Hilary Osborne and Josephine Moulds. Cyprus bailout deal: at a glance. Posted March 25, 2013 on theguardian.com. Web: <https://www.theguardian.com/business/2013/mar/25/cyprus-bailout-deal-at-a-glance> Of note, the E.U. has since chosen to replicate this model throughout its jurisdiction, in a directive effective January 1, 2015, as the preferred model for resolving the insolvency of financial institutions. See DIRECTIVE 2014/59/EU OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 15 May 2014, establishing a framework for the recovery and resolution of credit institutions and investment firms and amending Council Directive 82/891/EEC, and Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 2011/35/EU, 2012/30/EU and 2013/36/EU, and Regulations (EU) No 1093/2010 and (EU) No 648/2012, of the European Parliament and of the Council. Posted in the Official Journal of the European Union and visited June 25, 2016. Web: <http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32014L0059&from=EN>

[79] Wikipedia. List of castles in Northern Ireland. Visited June 29, 2016. Web: <https://en.wikipedia.org/wiki/List_of_castles_in_Northern_Ireland> See also Invest NI. Sectors and Opportunities – Tourism. Visited June 28, 2016. Web: <http://www.investni.com/invest-in-northern-ireland/sectors-and-opportunities/tourism.html> “Tourism is currently worth 4.9% of Northern Ireland’s GDP and sustains over 40,000 jobs. The aim is to double tourism’s contribution to the economy by 2020. This means generating an additional 10,000 new jobs and drawing in 4.5 million visitors into Northern Ireland every year.” What better way to rapidly and efficiently get this done, with obvious spillover benefits in the construction and technology sectors, and sustained residual revenue streams for all parties concerned.

[86]Id. See also Scotland Politics. Brexit: Spain and France oppose Scotland EU talks. Posted June 29, 2016 on bbc.com. Web: <http://www.bbc.com/news/uk-scotland-scotland-politics-36656980> This cooperation appears to be lacking with the mainland E.U. members showing a united resistance to Scotland’s overtures to negotiate its own way, while the U.K. has yet to even start the process. Keeping Scotland as a captive country like this, simmering on a backburner may yet cause blowback, as pent-up and rising discontent eventually boils-over.

[87] Szu Ping Chan, in Norway. Brexit: what if the UK left the EU and could be more like Norway? Posted June 27, 2016 on telegraph.co.uk. Web: <http://www.telegraph.co.uk/business/2016/03/06/what-if-britain-left-the-eu-and-could-be-more-like-norway/>; But see contra Katy Barnato and Gemma Acton. Norway’s PM not sure UK should copy its approach to EU. Posted May 12, 2016 on cnbc.com. Web: <http://www.cnbc.com/2016/05/12/norways-pm-not-sure-uk-should-copy-its-approach-to-eu.html> Norway has been able to negotiate its way into both the European Economic Area (EEA), as did Liechtenstein and Iceland, and the European Free Trade Association (EFTA), as did Switzerland. Norway has good access to the Common Market, accepts E.U. rules and regulations including free movement, and contributes to the E.U. budget. However, it is not a full E.U. member and has no vote or veto in creating or enforcing E.U. policies. As Norway’s PM and others point out, the lack of a voice and lack of access to the E.U. for services – including banking, which is a major component of the U.K. economy, might not make this model the first best offer of a negotiating, post-Brexit U.K.

[100] BioPharmGuy. Ireland – Biotech, Pharma & Life Science company career pages. Visited June 27, 2016. Web: <http://biopharmguy.com/links/country-ireland.php> This page contains a listing of biotech, pharmaceutical, and life sciences companies with major operations in the Republic of Ireland. See also Quora. Which major companies have their European headquarters in Ireland? Visited June 27, 2016. Web: <https://www.quora.com/Which-major-companies-have-their-European-headquarters-in-Ireland> In highlighting these dedicated E.U. headquarters, we find Alphabet, Facebook, Paypal, Microsoft, eBay, Twitter, and Airbnb based in Dublin; we find Pfizer, EMC, VMWare, and Apple based in Cork; and we find Intel based in Kildare.